Market Participants are advised that ASX intends to launch a suite of Carbon Futures products on the ASX 24 Market in 2024 to support Australia and New Zealand’s decarbonisation efforts and energy transition toward net zero. Carbon Futures will provide a transparent forward curve for the market to hedge and price the renewable energy transition as the world moves closer toward crucial emission reduction targets.

Demand for carbon credits continue to increase with Governments and corporates heavily focused on meeting their compliance and voluntarily emissions targets over the coming years. The Australian and New Zealand Governments have committed to achieving net-zero emissions by 2050 and are targeting a reduction of 43% and 50%[1] respectively in Green House Gas (GHG) emissions by 2030. Much of the private sector have also committed to net zero emissions targets by 2025 or 2030.

Green energy and carbon reduction infrastructure requires significant investment and time to develop. Carbon offsets (i.e. carbon credits) support the transition to net zero by directing funds to renewable energy projects and decarbonisation efforts whilst allowing organisations to meet their emissions targets.

ASX plans to list three deliverable Carbon Futures contacts underpinned by three separate markets, subject to final internal and regulatory approvals. The three contracts are:

·       Large Generation Certificate (LGC) Futures

·       New Zealand emissions Unit (NZU) Futures; and

·       Australian Carbon Credit Unit (ACCU) Futures

Key Features

·       Transparent forward curve – Carbon Futures may improve price and data transparency by creating a liquid forward curve out to 5 years that is readily tradable and based on transaction and/or bid-offer data

·       Standardised – Each Futures Contract is generic with one Future equal to 1,000 tonnes of CO2 equivalent not released into the atmosphere[2]

·       Deliverable – A deliverable contract offers an alternative avenue to access carbon credits. Those holding positions at expiry will be required to deliver or take delivery of underlying certificates with ASX facilitating end to end delivery to maintain anonymity throughout trading lifecycle

Timeline – subject to internal/external readiness and regulatory approval

LGC and NZU Futures

The tentative listing date for LGC and NZU Futures is late July 2024. Tentative testing dates for LGC and NZU Futures are currently April - May 2024 and will involve Clearing Participants (mandatory), Trading Participants and end users.

ACCU Futures

The tentative listing date for ACCU Futures is currently October 2024 however, this is dependent on the upgraded ANREU registry being operational by Q2-2024. Tentative testing dates for ACCU Futures are currently mid July – mid Sep 2024 and will involve Clearing Participants (mandatory), Trading Participants and end users.

Draft Contract Specifications

[1] 43% and 50% reduction below 2005 levels

[2] Or 1,000 MWh of renewable energy generation for LGC’s

What do I need to do by when?

Participants are encouraged to review the draft contract specifications and tentative dates outlined above and factor these into internal project/resourcing plans. Market Participants wanting to trade ASX Carbon Futures should be in contact with their Clearing Participant to ensure they are aware of the listing and will be set up to clear the new product(s) from go live. Participants wanting to trade the product and potentially go to delivery should also commence set up of accounts with the relevant registries.

ASX will be in contact with Trading and Clearing Participants and software vendors over the coming months to discuss the contract specifications and change management program.

Need more information?

Issued by

Monique Bell, Manager, Commodities

Contact information

Monique.bell@asx.com.au

or

Customer Service
+61 (02) 9338 0000
www.asx.com.au/contact

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